Inside the Nature Conservancy

Everybody loves to love the Nature Conservancy. With more than a million members, $1 billion in revenues in 2006, $4 billion in total assets and nearly 120 million acres of land either owned or protected by agreements globally, it is considered one of the most trusted U.S. organizations in Harris Interactive polling, and is one of the 10 largest U.S. nonprofits.

And the Nature Conservancy (TNC) isn’t resting on its laurels. In 2006, it adopted what it calls The 2015 Plan, hoping to conserve as much critical habitat and threatened lands in the next 10 years as it has in the last 50. To do so, outgoing TNC President Steve McCormick has ushered in a new era of partnerships, particularly with the large multinational corporations that have flocked in recent years to work with the organization. After McCormick’s unexpected resignation in October, COO Stephanie K. Meeks was named interim president, a move an insider said would not change the organization’s forward momentum.

Incorporated as a nonprofit in 1951, TNC put together the cash to help preserve its first 60 acres on the New York-Connecticut border by 1955. Rather than launching fiery, environmental activist campaigns, TNC staffers hewed to a less-threatening, simple land-acquisition strategy. It worked. By the start of McCormick’s tenure as president in 2001, TNC had reached the venerable age of 50, raised many hundreds of millions of dollars and protected well more than 10 million acres of land.

As president, McCormick — a TNC employee since he graduated from law school — exponentially expanded the organization’s success by what has been described in media accounts as a “transformational” overhaul. “Leverage” became a new TNC byword — leveraging incoming dollars, leveraging existing assets and leveraging relationships with corporations — in the service of accomplishing even greater conservation goals.

McCormick and others inside TNC say they realized that, in spite of the organization’s assets and achievements, there would never be enough money coming in fast enough to buy up all the threatened and endangered land in the United States and around the globe. So, creative deal making and innovation in conservation came to be considered a must.

Big money, bigger effect
Nowhere is the quest for leverage clearer than in TNC’s partnerships with big companies. TNC has million-dollar partnerships with Cargill, Xerox (NYSE: XRX), and Lowe’s (NYSE: LOW); it received a $12 million gift from Caterpillar (NYSE: CAT) in 2005 to launch a “Great Rivers” initiative. Nearly 2,000 companies have formed either short- or longer-term partnerships with TNC, and currently around 30 active partnerships are ongoing, according to Josh Knights, TNC’s director of corporate partnerships.

What attracts companies is TNC’s pragmatism and non-confrontational approach, Knights says. “We are very centric. That appeals to lots of companies that may have been burned in the public arena by left-leaning colleagues.”

For example, environmental organization Greenpeace for some time actively demonstrated against agribusiness company Cargill’s interests in the Amazon. Greenpeace protested Cargill’s relationship with Brazilian soybean farmers over concerns that illegal soy production was contributing to deforestation in the Amazon, and also against the company’s construction of a huge local port, which threatened to further expand soy production. Greenpeace demanded a moratorium on soy from newly deforested areas and staged storefront protests pressuring McDonald’s (NYSE: MCD), a key Cargill customer, to support its demands. In 2006, Cargill agreed to the moratorium.

The Nature Conservancy has partnered with unlikely companies in both the agribusiness and paper products industry to protect ecosystems along the Mississippi River and around the globe. Courtesy the Nature Conservancy.

 Already in 2004, Cargill had awarded TNC a $1 million grant to support sustainable agriculture in the Amazon as well as in China’s Yunnan province and along the Mississippi River. While Greenpeace blocked Cargill ships, held demonstrations and eventually got Cargill’s Santarém port closed, TNC was funded by Cargill to craft a “responsible soy” project to encourage and incentivize farmers to comply with Brazilian laws meant to stop deforestation, as well as set up a protected forest area near Santarém.

“The way the Nature Conservancy works would never be the way Greenpeace works,” says Paulo Adario, Greenpeace’s Amazon campaign coordinator. “Other NGOs working on this aren’t paid; we’re working together as part of the vision. But I don’t want to judge the strategy for stopping deforestation, I just want deforestation to stop.”

Reliance on Science
But while activists may remain skeptical about TNC’s strategies, businesses say they gravitate to TNC for its style and its science-based approach. “They are very partner-oriented,” says Anne Stocum, Xerox vice president of Environment, Safety and Health. “They are also focused, and have not allowed themselves to be diverted from their goals. As a data-driven company, that approach was very appealing to us.”

Conservation by Design, the framework guiding all of TNC’s programs, “marries a collaborative, science-based approach to key analytical methods” in assessing and planning for conservation, according to the nonprofit’s Web site. “Conservation by Design is very appealing because it is essentially a business plan,” Knights says. “It is setting priorities, developing strategies, measuring impact. We’re very into metrics.”

Xerox, which last year committed its $1 million to TNC to advance forest-conservation tools, understands and appreciates such an approach, Stocum says. As the largest brand distributor of cut-sheet paper in the world, Xerox had come under fire in 2005, particularly by activist-environmental group Rainforest Action Network, for sourcing paper from Weyerhaueser in “ecologically sensitive” forests, especially in Canada. Xerox had issued specific requirements to its suppliers regarding sourcing in 2003, Stocum says. But Xerox also decided to reach out to TNC to improve forest conservation in three specific areas: data collection, especially to help pinpoint high-conservation-value forests; improving standards for forest certification; and best practice recommendations for suppliers. Xerox earmarked its $1 million grant to TNC to be equally divided between the three areas over a three-year period.

“One of the big goals, for us and TNC, is biodiversity,” Stocum says. “In North America, the Nature Conservancy has done pioneering work in that area.” Xerox wanted to work with an organization that had the know-how and could also extend itself internationally, she says, and TNC had both.

Scarcely a year into the partnership, Stocum says she is encouraged: The Canadian Boreal Forest Information Center was launched, in part from TNC and Xerox grants, in summer 2007. A pilot toolkit to help identify important forest landscapes is under development, and plans are underway to reconnect an Atlantic forest corridor in Brazil by purchasing and cobbling together individual forest parcels into a contiguous strip. “It’s a very complicated process,” Stocum says. “We don’t think we are ‘saving the world.’ But in terms of the value we get out of the partnership, it is work we really believe in.”

Knights says TNC is working from the realization that at best, only 5 percent of the world’s biological diversity will be secured on formally designated, protected areas. “It all boils down to making dollars go further,” he says. “We’re always looking for ways to work more efficiently. We’re not afraid to break old patterns and innovate.”

In Brazil’s Atlantic Forest, Knights points to instituting water-use fees, securing carbon financing to fund forest restoration and providing incentives for local sustainable forestry practices as examples of TNC’s innovative practices.

Where no nonprofit has gone before
The Nature Conservancy was an early pioneer in the art of the use of conservation easements as voluntary but legally binding agreements restricting sensitive lands’ development. TNC also uses conservation buying, wherein land is purchased by TNC, easements are created and land is then resold to buyers, sometimes at very favorable prices. In many conservation-buying deals, buyers gift back some (or all) of the price differential to TNC and take legal tax breaks for that amount.

A good example of how complex these type of deals can be — and have become — is the huge forest deal TNC constructed in 2006 with International Paper (IP), brokered by the timber-investment group Conservation Forestry LLC. The agreement covers 218,000 acres of forest in 10 states. TNC purchased 173,000 acres of the total. IP will get $300 million for the sale. Some of the lands will then be transferred by TNC to Conservation Forestry, which says it will sustainably manage and log them. TNC will still retain purchase rights or easements on much of the forest, and particularly sensitive lands are to be off-limits to harvesting. As forestlands become more valuable for development than they are for logging, deals such as this one are crucial for forest-preservation efforts, says CF principal John Tomlin.

The Nature Conservancy's partnership with agribusiness giant Cargill funded sustainable agriculture programs in China's Yunnan province. Courtesy the Nature Conservancy.

Knights says IP and TNC have a long history of working together, which helps in deals of this magnitude and complexity. IP has sold other large parcels to TNC for conservation, and TNC worked with IP in strengthening the Sustainable Forests Initiative (SFI) certification. At the same time, Knights says the partnership hasn’t been conflict-free; TNC was active in advising around the competing Forest Stewardship Council (FSC)standards, which caused friction. Eventually, both sides realized they had more to gain by working through the difference than letting the partnership crumble, he says.

Critics have questioned some aspects of TNC’s deal-making, however. In 2003, a series of articles in the Washington Post scrutinized TNC’s use of conservation easements and conservation buying, especially in the controversial purchase of a Martha’s Vineyard beach, as well as instances in which TNC sold lands to its own trustees through the conservation-buyers program.

Underlying the Post’s critique is the belief nongovernmental or nonprofit organizations should naturally adhere to rigorous ethical and accounting standards, perhaps even more rigorous than those used by for-profit companies. But because of their public-good goals, nonprofits aren’t subject to the financial and other oversight mechanisms that lead to transparency; no U.S. agency tracks fraud or mismanagement in nonprofits.

After the Post articles, TNC took action, saying it would end the practice of making deals with board members, trustees and/or employees. It also promised to closely document monies it received related to the conservation-buying program. And, over time, TNC implemented key principles of the Sarbanes-Oxley Act aimed at bringing accounting and oversight practices in line with those required of publicly traded companies.

The Post articles, Knights says, stretched the truth in some areas to make their case. “Many of the things they wrote were such a stretch… It was ridiculous.” But they did serve as a wake-up call, he adds. “After the articles, there was surprise, shock and anger. It was like the steps of grief. At the end of the day, you can stay in denial, or accept. We stumbled, but we accepted and recovered. I’ll just say our organization’s culture has really grown over time. ‘Conflict of interest’ is now a strong part of our internal lexicon.” It is also part of TNC’s way to work — an internal risk-assessment group and strong conflict of interest policy are two tools Knights cites as helping guide its work with corporations.

Pablo Eisenburg, a senior fellow at Georgetown University’s Public Policy Institute, says nonprofits still get most of their oversight from the media, and need to go further to demonstrate accountability. “I believe TNC or other large conservation organizations can be successful and still play by the rules, namely: public accountability, having boards with no conflicts of interest (as was the case with TNC) and not engaging in public dealing (as was also the case with TNC),” he says.

Despite TNC’s business-minded strategy for achieving its goals, Eisenburg points out the organization is still not a for-profit corporation. “In the final analysis, conservation organizations are nonprofits, not businesses, and they should operate as nonprofits.” But outgoing TNC president McCormick has said TNC must continue to innovate, and on a grand scale, to meet its 2015 goals. Some strategies — including social-enterprise efforts such as a failed sweet potato-chip factory — have already been tried and rejected.

Others, such as TNC’s ventures into global debt-for- nature swaps, are bearing better fruit. Last year, TNC invested approximately $1 million to purchase $24 million of Guatemala’s debt from the U.S. Treasury. Guatemala continues to make debt payments, but into its own newly formed Conservation Trust Fund. TNC helps manage the fund, which is used to finance forest conservation over a period of years.

“Previously, the Conservancy had helped initiate debt-for-nature swaps in Belize, Panama and Jamaica,” Knights says. “In total, TNC has invested around $6 million in these agreements — an investment that is leveraging around $60 million in regional tropical-rainforest conservation.”

Scott Edward Anderson, a former TNC employee now working as vice-president at Ashoka, the association of social entrepreneurs, says conservation on a global scale continually necessitates new ways of working, in particular with corporations. “We ignore the power and reach of corporations at our peril,” Anderson says. “To have them on our side will make the difficult task of conservation have more of a chance. We need to make green equal ‘green,’ in terms of money, to have a chance at success.”